Outside the Box: Debt financing is not the economy’s enemy

In his recent MarketWatch opinion article entitled “The Global Elite’s Bag Of Financial Tricks,” commentator Satyajit Das mischaracterizes private equity and debt financing in a broader swipe at the financial industry. His description is inaccurate, and in the process, distorts a long-standing, sound tax policy.

The article conflates debt financing with financial engineering, missing the importance of borrowing for firms of all sizes and across many industries. In arguing that companies rely on lower-cost debt financing, Das correctly notes the key role played by an important tax provision; the deductibility of interest expense. But it is a mistake to imply something nefarious about a practice that has existed for decades and allows businesses to manage, invest in, and ultimately expand their operations.

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